Question: 2. (10 points) You are considering the following two mutually exclusive projects. Both projects will be depreciated using straight-line depreciation to a zero book value

2. (10 points) You are considering the following two mutually exclusive projects. Both projects will be depreciated using straight-line depreciation to a zero book value over the life of the project. Neither project has any salvage value. Project A Year Cash Flow 0 -$75,000 1 $19,000 2 $48,000 3 $12,000 Project B Year Cash Flow 0 $70,000 1 $10,000 2 $16,000 3 $72,000 Required rate of return for Projects A and B are 10%, 13% respectively. Required payback period for both projects is 2.0 years a) Based on the net present value method of analysis and given the information in the problem, what should you do? (3 points) b) Based upon the internal rate of return (IRR) and the information provided in the problem, what should you do? (3 points) c) Based upon the payback period and the information provided in the problem, what should you do? (2 points) d) Based upon the profitability index (PI) and the information provided in the problem, what should you do? (2 points)
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